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Effect of Children on Ordinary/Adjusted Income Free Area

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Last amended: 20 September 2009

    

Note: From 20 September 2009, the information provided under this topic applies only to those assessed under transitional rules.
Ordinary/adjusted income free area increased

The ordinary/adjusted income free area used in calculating a person's service pension or income support supplement is increased for:

  • each dependent child under 18 years,
  • each youth allowance recipient under 18 years,
  • each dependent child over 18 who is not a prescribed student child within the meaning of the Social Security Act 1991, and
  • each dependent child over 18 who is a prescribed student child and in respect of whom a carer allowance under the Social Security Act 1991 is being paid to the service pension or income support supplement recipient or their partner.
Effect of child payments on the additional free area

Generally, payments received for or in respect of a dependent child reduce the additional free area. Examples of these kind of payments are:

  • amounts received from State authorities in respect of the boarding out of the child,
  • foster care allowance payments made by a State welfare authority.
Additional ordinary/adjusted income free area reduced

When a payment is received in respect of the dependent child, the additional free area for a dependent child of a pensioner may be reduced as shown in the following table.

If a payment is received in respect of the dependent child and the pensioner is...

Then the additional free area for a dependent child is reduced by...

  • not a member of a couple, or
  • partnered and the partner is not in receipt of a service pension, income support supplement, social security pension or social security benefit, or
  • partnered and the partner is in receipt of a social security benefit

the annual amount of the payment

partnered and the partner is receiving a service pension, income support supplement, or a social security pension

one half of the annual amount of the payment

Additional free area not reduced

The additional free area is not reduced by the following payments in respect of a dependent child:


Pensioners and ISS recipients who were in receipt of pension on or before 19 September 2009 are eligible to be assessed under transitional rules, if:

  • transitional rules will result in a higher rate of pension, and
  • they have never been assessed under the new rules.

The requirement that the pensioner has never been assessed under the new rules, does not arise where the pensioner's entitlement is re-determined from a date prior to 20 September 2009.  Where new pension information is received and is effective prior to this date, the pensioner's right to receive the transitional rate is considered anew.

Once a pensioner or ISS recipient has been assessed under the new rules they cannot revert to transitional rules.  There is one exception to this, to cover respite care changes to pensioners who return to live as a couple again.

Recipients assessed under transitional rules:

  • have their payment calculated using the transitional maximum basic rate,
  • have a taper rate of 40 cents in the dollar for the income test, and
  • can still receive the additional income free area for children.

 

 

The ordinary/adjusted income free area provides that the pensioner may receive income up to a certain amount without any reduction in their maximum rate of pension.

Any income in excess of the free area will reduce the pension at the rate of 50 cents in the dollar, or 40 cents for those receiving a transitional rate of pension. The amount of ordinary and adjusted income free areas is specified in item 1 in Table E-1 in point SCH6-E6 VEA.

 

Note:  War widow's pension is included as income under the adjusted income test. Neither disability pension nor war widow's pension are included as income under the ordinary income test.

 

 

A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.

ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.

 

 

A person is a prescribed student child if:

  • the person has reached 16 years of age, but is under 22 years of age, and
  • is qualified to receive payments under a prescribed education scheme.

 

Section 5F(1) of the VEA defines dependent child as having the same meaning as in the Social Security Act 1991.  For income support purposes, dependent child is defined as:

Child under 16 years

  •       the pensioner has legal responsibility either alone or jointly with another person for the day to day care, welfare and development of the young person AND the young person is in the pensioner's care, or
  •       the young person is not a dependent child of someone else AND the young person is wholly or substantially in the pensioner's care.

A child under 16 years cannot be considered a dependent child if:

  •       they are not a full-time student, and
  •       their weekly income from any source is more than the amount specified in section 5(3)(c) of the Social Security Act.    

Child 16 years or older

A young person who has turned 16 years but is under 22 years can still be a dependent child of the pensioner if:

  •       they are wholly or substantially dependent on the pensioner, and
  •       their income in the financial year will not exceed the personal income limit, and
  •       they are receiving full-time education at a school, college or university.

A child over 16 years cannot be considered a dependent child if:

  •       they receive a social security pension or benefit such as youth allowance, or
  •       their personal income is more than the amount specified in section 5(4)(b) of the Social Security Act.    

Income includes earning from casual, part-time or full-time earnings.

Note: the meaning of a dependent child for DVA income support pension purposes is not the same as the meaning for Family Tax Benefit purposes.

 

 

The term social security pension is defined in Section 5Q(1) VEA to mean:

  • age pension;
  • disability support pension;
  • wife pension;
  • carer payment;
  • pension PP (single);
  • sole parent pension;
  • bereavement allowance;
  • widow B pension;
  • mature age partner allowance;
  • special needs pension.



As benefits (pensions) may change, for the most current definition access this link to the Social Security Act 1991

http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401781?OpenDocument

 

 

The term social security benefit is defined in Section 5Q(1) of the VEA to mean:

  • widow allowance;
  • youth allowance;
  • austudy payment;
  • newstart allowance;
  • sickness allowance;
  • special benefit;
  • partner allowance;
  • mature age allowance;
  • benefit PP (partnered);
  • parenting allowance.

As benefits (pensions) may change, for the most current definition access this link to the Social Security Act 1991

http://www.comlaw.gov.au/comlaw/management.nsf/lookupindexpagesbyid/IP200401781?OpenDocument

 

 

According to subsection 5K(1) of the VEA, maintenance income in relation to a person, means:

  • child maintenance — that is, the amount of a payment or the value of a benefit that is received by the person for the maintenance of a maintained child of the person and is received from:
  • a parent of the child, or
  • the partner or former partner of a parent of the child, or
  • partner maintenance — that is, the amount of a payment or the value of a benefit that is received by the person for the person's own maintenance and is received from the person's partner or former partner, or
  • direct child maintenance — that is, the amount of a payment or the value of a benefit that is received by a maintained child of the person for the child's own maintenance and is received from:
  • a parent of the child, or
  • the partner or former partner of a parent of the child,

but does not include disability expenses maintenance.

 

 

Aboriginal study assistance scheme means:

  • the ABSTUDY scheme, or
  • the Aboriginal Overseas Study Assistance Scheme.

The Assistance for Isolated Scheme is administered by Centrelink. The aim of the scheme is to help the families of students who are unable to attend an appropriate school daily because of geographic isolation.